What changed
This is an annual update of the Master Circular on loans and advances restrictions, incorporating instructions issued up to June 30, 2009. It replaces the July 1, 2008 version and consolidates all relevant circulars listed in Annex 5.
What it means for you
Banks must ensure their lending policies comply with the updated statutory and regulatory restrictions, including prohibitions on advances against own shares, to directors, and for share buy-backs. The circular also covers regulatory limits on loans to relatives of directors, officers, and sectors like real estate, gold, and sensitive commodities.
What you must do
- Review and update internal lending policies to align with the consolidated restrictions in this Master Circular.
- Ensure no advances are made against the bank's own shares or to directors except as permitted under the Banking Regulation Act.
- Verify compliance with regulatory restrictions on loans to relatives of directors and senior officers.
- Check that lending to sectors like real estate, gold, and sensitive commodities follows the specified guidelines.
- Train credit officers on the updated restrictions and maintain documentation for audit.
Who it affects
All Scheduled Commercial Banks (excluding Regional Rural Banks), Credit departments and loan officers, Compliance and audit teams, Board of Directors and senior management
Does this circular apply to Regional Rural Banks?
No, the circular explicitly excludes Regional Rural Banks (RRBs) from its application.
What are the key statutory restrictions covered?
Key statutory restrictions include prohibitions on advances against the bank's own shares, advances to directors, restrictions on holding shares in companies, and restrictions on credit for buy-back of securities.
Where can I find the full list of consolidated circulars?
The full list of circulars consolidated in this Master Circular is provided in Annex 5 of the document.